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20 October 2011updated 22 Oct 2020 3:55pm

The failed culture of our capitalism

Responsible capitalism can be innovative and profitable. Britain's businesses must lead the change.

By Marc Stears

Almost everyone is suddenly talking about the culture of capitalism. It is not just those camped out at St Paul’s who are worried about the behaviour of the corporate elite. The right wing press is hounding the big six energy companies. Westminster insiders are turning on industry lobbyists. Even Ed Balls has found a moral voice.

Far more comfortable talking about systems than values, the Shadow Chancellor has now laid the blame of Britain’s economic woes on a culture of irresponsibility. It is a message “coming from people up and down the country”, Balls told the Evening Standard recently. “They want the economy to be based on proper standards.”

For some critics, this talk of culture and standards agenda is a moralizing distraction. Our focus, these more traditional voices argue, should be on the structural shortcomings of our economy; not on its culture. It is only once we have tackled youth unemployment and the squeeze on living standards that we should turn our attention to business ethics.

But that is to make a crucial mistake, for it was the failed culture of our capitalism that helped to get us into our economic mess in the first place. Understanding and improving that culture is not a distraction. It is central to working out how we get out of the crisis.

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The relationship between culture and economics is straightforward. It is the culture of “grab-all-you-can” that encourages CEOs to press for salary packages that far outstrip their contribution. It is the culture of “profit-by-any-means” that leads some unscrupulous employers to lay off their workforce at the earliest opportunity. It is the culture of “care-only-for-the short-run” that starves Britain’s businesses of the investment they needed to compete globally. It was all of these cultural failings combined that brought us the crash of 2008 and its devastating consequences.

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Just as there are cultural causes of our economic malaise, so there are cultural solutions, too. We don’t need to occupy public squares or wait until Labour is back in government. We can play our part right away by quietly insisting that we will not stand for the destructive irresponsibility that has blighted parts of our economy for far too long. As the Management Professor Harry Mintzberg says, it is up to all of us to show that the economic culture of the “short run has run out.”

Crucially, that goes for those of us in business at least as much for the rest of the public. We have some truly great firms in Britain. We have imaginative entrepreneurs and committed workforces. These businesses already have a clear interest in rejecting the kind of practices that have led to economic ruin. More importantly, they increasingly realise how innovative, dynamic and profitable a more responsible capitalism can be.

To create a sustainable economic recovery, the culture of Britain’s businesses must change. That much is already clear. We need also to acknowledge that it is business itself that will change it.

Marc Stears is Professor of Political Theory at the University of Oxford and a Visiting Fellow of the Institute for Public Policy Research.